Brazil's competition tribunal CADE has ruled on a two-year investigation into Coca-Cola's acquisition of a Brazilian bottled tea company.
The acquisition of Leão Junior has been passed, but Coca-Cola must end its existing partnership with Nestlé to avoid excessive concentration in the local tea market.
The decision follows a challenge by Pepsi, which co-owns the second-largest tea company, who claimed that consumers in the 'ready-to-drink tea' market would be damaged by the deal.
Coca-Cola argued for a wider market definition, however. Sérgio Varella Bruna of its counsel, Lobo & de Rizzo Advogados, says, "My view is that this restriction was unnecessary, since we have succeeded in demonstrating that the relevant market is broad and comprises not only tea-based beverages (such as Nestea), but also mate (such as Leão-owned Matte Leão) and ‘guaraná natural', a still beverage made out of a fruit from the Amazon, very popular in Brazil, especially in Rio de Janeiro."
He argues that CADE accepted Coca-Cola's market definition, but that its board "made a ‘product-by-product' price simulation, and concluded that Coca-Cola should not control two of the major brands in the market."
"I respect the decision, but I cannot agree with it," he says, adding that Coca-Cola has decided not to challenge the ruling.
Xavier, Bernardes, Bragança, Sociedade de Advogados partner Marcio Cordeiro Filho helped Pepsi challenge the deal. He says, "The market definition was challenging, since the technical data allowed more than one interpretation."
Coca-Cola and Nestlé's Nestea has a 24.4 per cent market share, while Lipton - owned by Pepsi and Unilever - has a 24.7 per cent share. Coca-Cola will now withdraw from its joint venture, as the sale would have handed the company more than a 70 per cent share in the local tea market.
The deal to buy Leão Junior for an undisclosed amount was announced in early 2007, but the sale was put on hold last year following Pepsi's appeal.
Carlos Ragazzo, the CADE commissioner who ruled on the case, says, "These kinds of agreements do take a while to be negotiated and involve several rounds of meetings. This is a pattern that can be seen in other cases in Brazil. The final wording of the agreement pleased CADE and we are confident that our competition concerns were properly addressed by it."
"I truly believe that negotiated solutions are the best way to ensure enforcement of our decisions," he adds.
Counsel to Coca-Cola
•In-house counsel - legal director Rodrigo Winter Caracas
•Lobo & de Rizzo Advogados
Partner Sérgio Varella Bruna and associates Caio de Queiroz and Natalia Pinheiro (in the antitrust filing)
Partner José Orlando Arrochela Lobo and associates Patricia Amaral Mello, Pilar Alonso Lopez Cid and Júlia Cunha Tanaka (in the merger)
Counsel to Pepsi Co (in the antitrust filing)
•Xavier, Bernardes, Bragança, Sociedade de Advogados
Partner Marcio Cordeiro Filho and associates Leopoldo Pagotto and Bruno Maggi
Counsel to Leão Junior
•In-house counsel - legal director Cynzia Carla Fontana and Thaysa Tavares Zanotto
Machado, Meyer, Sendacz e Opice Advogados
Partner Tito Amaral de Andrade (in the antitrust filing)
Partner Carlos José Rolim de Mello and associates Guilherme Bueno Malouf Joana Paula Cardozo and Gabriel Fernando Barretti (in the merger)
(Latin Lawyer 22.06.2009)
(Notícia na Íntegra)